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Friday, February 28, 2014

The Federal Reserve recently released transcripts from its
meetings in 2008.Given the significant
financial events that occurred in that year, it seems worthwhile to go through
the transcripts in some detail.

As I work through the entire set of transcripts, in addition
to a blog post I will post my comments in a new tab, entitled “Federal Reserve
Transcripts 2008.”I will do the same
thing for each new post – likely covering one meeting at a time.

It was December 2007, and
officials at the Federal Reserve were torn between two visions of what was in
store for the nation’s economy: a mild slowdown or outright recession.

A staff presentation described a
highly unlikely, worst-case scenario that included a 10 percent drop in the
stock market.

The New York Daily News:

“I do not expect insolvency or
near insolvency among major financial institutions,” Bernanke said at the Fed’s
December 2007 meeting, as the economy was already starting to spiral into the
Great Recession.

To summarize the Fed’s views at year-end 2007:

·“a mild slowdown or outright recession,” but no
mention of the possibility of the greatest financial calamity to hit the United
States and much of the world since the Great Depression;

·“a highly unlikely, worst-case scenario that
included a 10 percent drop in the stock market,” missing the mark by just a wee
bit as the S&P 500 fell by more than 50%;

·Bernanke did “not expect insolvency or near
insolvency among major financial institutions,” well Lehman went belly up in
the largest bankruptcy in history and the entire lot of them would have
followed along had not the Fed and Treasury intervened.

So how does the Fed start the meeting?Bernanke opens the floor to Mr. Dudley:

Market function has improved
somewhat since the December FOMC meeting. This can be seen most notably in the
term funding, foreign-exchange swap, and asset-backed commercial paper markets.
In addition, some of the risks of contagion—for example, from troubled SIVs and
from financial guarantors to money market mutual funds or the municipal
securities market—appear to have lessened slightly.

Nothing referencing the objectives of the mandate.But I can give the Fed the benefit of the
doubt – efficient functioning of markets is buried somewhere in the Fed’s job
description; given the risks to the financial system that had to be obvious
even to the oblivious, it is at least arguable that Bernanke should start here.

As can be seen on the first page of
the handout in exhibits 1, 2, and 3, term funding spreads have fallen sharply
for dollar, euro and sterling rates. For example, the one-month LIBOR–OIS
spread is now 31 basis points, down from a peak of more than 100 basis points
in December.

The use of LIBOR as a measure of financial market health has
been exposed as less than valuable – it seems the Fed may have known something
about the manipulation of this self-reported rate as
early as 2007:

The Federal Reserve Bank of New
York may have known as early as August 2007 that the setting of global
benchmark interest rates was flawed.

Dudley goes on to report improvements in various financial
markets.All is not rosy, however:

Despite these positive developments
in terms of market function, financial conditions have tightened as balance
sheet pressures on commercial and investment banks remain intense and as the
macroeconomic outlook has deteriorated. This can be seen in a number of
respects.

First, large writedowns and larger
loan-loss provisions are cutting into bank and thrift capital and pushing down equity prices.

Second, corporate credit spreads
and credit default indexes have widened sharply in the past few months, with a
significant rise registered since year-end.

Third, equity markets are under pressure. For example, as illustrated in
exhibit 11, the S&P 500 index declined in the fourth quarter and, up
through yesterday, has fallen about 5 percent so far this year. Moreover, the
equity market weakness has broadened out beyond the financial sector. For
example, as of yesterday’s close, the Nasdaq index, which has little weight in
financials, had fallen 8 percent this year. Global stock market indexes have
also generally weakened.

Saturday, February 22, 2014

Like most Koreans, the farmers and
fishing families protested the senseless division of their nation between north
and south in 1945 – a line drawn along the 38th Parallel by an American
official, Dean Rusk, who had “consulted a map around midnight on the day after
we obliterated Nagasaki with an atomic bomb,” wrote Cumings.

In fact, Korea, north and south,
has a remarkable people’s history of resistance to feudalism and foreign
occupation, notably Japan’s in the 20th century. When the Americans defeated
Japan in 1945, they occupied Korea and often branded those who had resisted the
Japanese as “commies”.

Wasn’t resisting Japan what the Americans were doing for
almost four years?Does this make the
Americans “commies” as well?Perhaps we
could ask America’s
greatest ally during the war what he thinks.But I digress.

Cumings exposes as propaganda the
notion that Kim IL Sung, leader of the “bad” Korea, was a stooge of Moscow. In contrast, the regime that Washington
invented in the south, the “good” Korea, was run largely by those who had
collaborated with Japan and America. (emphasis added)

The United States defeated Japan in World War II,
mercilessly bombing countless civilians in the process, and then immediately used
Japanese connections to control South Korea – an artificial creation of an
American giddy with nuclear success.This statement regarding Koreans who had collaborated with Japan and America is actually a nice bow tied
around a gift that was first purchased forty years earlier – in 1905.

In the summer of 1905, President
Theodore Roosevelt – known as Teddy to the public – dispatched the largest
diplomatic delegation to Asia in U.S. history: Teddy sent his secretary of war,
seven senators, twenty-three congressman, various military and civilian
officials, and his daughter on an ocean liner from San Francisco to Hawaii,
Japan, the Philippines, China, Korea, then back to San Francisco. (P. 1)

Roosevelt was confident that the future of the United States
would be determined more by its position facing China than in its position
facing Europe.Certainly, the position
in Europe already had a strong foothold, via the Anglo-American empire and America’s
emerging role in it.

Roosevelt’s held a superior view of the great Anglo race –
emerging from the Caucasus, moving through central Europe (the Germanic
tribes), on to England then the eastern fringe of North America.From there, an entire continent was
conquered.Roosevelt saw the next steps
to the west, meaning the entire Pacific, even unto China.

And for this, he sent the delegation, led by William Howard Taft.Their purpose was to secure the continuation
of this tribal wandering to the west.

What is the tie to this statement, referenced above, by
Pilger?

…behind [Roosevelt’s] Asian whispers
that critical summer of 1905 was a very big stick – the bruises from which
would catalyze World War II in the Pacific, the Chinese Communist Revolution,
the Korean War, and an array of tensions that inform our lives today.The twentieth-century American experience in
Asia would follow in the diplomatic wake first churned by Theodore Roosevelt.
(P. 4)

To gain a foothold in Asia, Roosevelt felt it necessary to
gain an ally in the region – one to do the heavy lifting.His problem – there was no Anglo presence
capable of the task, unlike the migrating tribes that ended up reaching the
Pacific coast of the New World.Japan was
to play the part of “Anglo” – don’t ask, I will come to this later.

Apparently, the Dutch have won several medals in Olympic
speed skating, while the US has been shut-out.(I wouldn’t know; I haven’t watched a minute of any of the events).

Mr. Anema believes the reason is simple:

"You have a lot of attention
for foolish sport, like American football," Anema told CNBC on Friday.
"You waste a lot of talent, athletic talent, in a sport where it's meant
to kill each other, to injure each other.”

I believe Mr. Anema would understand this better if he
appreciated the psychological and emotional conditioning brought on by sports
in general in the United States – but most particularly American football.

Before the game, military aircraft fly overhead; 60,000
people rise in joyous adulation.This is
followed by the singing of the national hymn of
worship.The words were written
during America’s first war of foreign conquest – the war of 1812.The intent was to conquer Canada.The Americans failed; hence the war is instead
known in the US as the second war for independence (or, more often, ignored).

The national hymn of worship is accompanied by a military
color guard, or on special occasions, an entire military band.The lyrics include bombs and rockets, but
most of all the flag – the colorful rag that artificially separates man from
man.

Next comes a veteran of the war in Afghanistan, complete
with his congressional medal of honor.He
marches onto the field.The crowd turns
silent – all 60,000 people.Not a
sound.The crowd is told of his various
accomplishments, meaning how many people he killed.Even more than for the military aircraft and
the national hymn of worship, the crowd’s enthusiasm in uncontainable.

The game hasn’t even started, but the crowd is now in an
almost uncontained frenzy – emotionally charged by national symbols of faith;
reminded of the good in America
through its brave military.

The crowd is in a fever pitch – symbols and singing all
associated with death and destruction have brought them to this point (along
with decades of conditioning by public schooling and mainstream media).

Now on to the game, and a reminder of Mr. Anema’s comments:
“You waste a lot of talent, athletic talent, in a sport where it's meant to
kill each other, to injure each other.”

The crowd is rightly prepared for a sport in which men will
be injured. But the moment holds deeper meaning, yet the connection is so
obvious; the analogy is too easy.His
statement is equally applicable to the “sport,” if you will, of overseas
conquest – the sport of the heroes who moments before flew overhead or marched
onto the field.

"... (The U.S.) is so
narrow-minded, and you waste a lot of good talent in a sport that sucks."

Mr. Anema is correct.Sadly, he is applying his words to the wrong sport.

Wednesday, February 19, 2014

Another day, another suck-the-joy-of-liberty-out-of-the-joy-of-liberty
article.This one, from Reason, is entitled “Time
for a Guaranteed Income?”And sadly,
it isn’t followed by a simple one-word, two-letter response.

The author is Veronique de Rugy, a senior research fellow at
the Mercatus Center at George Mason University.Get any clues from this position and title?I will give you another clue, in case you
still haven’t caught on: The subtitle of the article is “The pros and cons of a
welfare idea championed by liberals and libertarians alike.”

Raise your hands if you already know where this is headed.

OK, for the rest of you….

Switzerland will soon hold a
nationwide referendum on granting a guaranteed and unconditional minimum
monthly income of $2,800 for each Swiss adult. In America, where Lyndon
Johnson's War on Poverty just celebrated its 50th anniversary of failing to
achieve victory, liberals jumped on the Swiss news to reconsider the
un-American-sounding idea of a universal basic income.

Surprisingly to some, they were
joined by many libertarians. The list of intellectuals who have made cases for
a guaranteed minimum income over the years includes such laissez-faire
luminaries as Milton Friedman, Friedrich Hayek, and Charles Murray.

Let’s see, who are these libertarians?A Chicago School Keynesian monetarist central
planner (but I repeat myself), an Austrian economist who, unfortunately,
supported many interventions in the market, and a fellow at the American
Enterprise Institute.Hear no
libertarianism; see no libertarianism; speak no libertarianism.

And what libertarian cred do these three bring to the
discussion?

Friedman favored a negative income
tax (NIT), in which taxpayers who earn less than the established minimum
taxable income level would receive a subsidy equal to some fraction of that
difference. (A watered-down version of this became the Earned Income Tax
Credit.) Hayek defended a minimum income floor, in which the government
provides a conditional income to each adult. Murray's 2006 book In Our Hands
argued for an unconditional $10,000 annual cash payment to all adult Americans,
coupled with a repeal of all other welfare transfer programs.

A negative income tax…a minimum income floor…and $10,000
cash on the barrel-head.

JD: Quasi-utilitarian arguments flourished in the economics
mainstream, ceding the intellectual high ground in favor of arguments that free
markets merely “worked” better.

[Rothbard] literally laid out the ethics of liberty,
explaining the legal and political conclusions necessarily flowing from
self-ownership, the natural rights tradition, and the principle of
nonaggression. He made the clear case for property rights as the foundation of
a free society, applying the same standards to government and private actors.

BM: Sadly, too many pseudo-libertarian institutions today
swim in the world of utilitarian arguments.Rothbard made countless contributions to the advancement of Austrian
economics, revisionist history, and libertarian thought.In my opinion, his most valuable contribution
was in building an ethical foundation for liberty.

Utilitarian arguments build no foundation.Utilitarian arguments are for politicians
(and those who want to curry favor with politicians) – and are subject to the
same word and logic twisting that causes many of us to despise many of them.

People want to believe in something.“What works best” is go guideline; it is quicksand
– and such a utilitarian approach delivers the battlefield to the enemy.

Thankfully, in Mr. Deist, the Mises Institute makes clear it will
continue in its tradition of holding to the principled, ethical path.

Tuesday, February 18, 2014

Sometimes shallow,
sometimes callous
(this one is still stunning to read).

This
time the subject is the Middle Ages, and Mr. Black’s ignorance on the
topic.Yes, yes, I know – not such a big
deal in the grand scheme of things.But,
as regular readers know, a rather important topic for me.

He dreams of time travel:

Time travel is an almost universal
fantasy. And if I could snap my fingers and turn the pages of time, I’d be
seriously curious to check out the thousand-year period between the decline of
the Western Roman Empire and the rise of the Renaissance.

Absent certain modern inconveniences, it would be an
interesting time to visit.

Now, for the first fallacy:

They used to refer to this period
as ‘the Dark Ages’ (though historians have since given up that moniker), a time
when the entire European continent was practically at an intellectual
standstill.

It is true that historians have stopped using the term.If he knows this much, one would hope he also
knows the reason why.Alas, it is not to
be.

There is a reason for giving up this moniker – the age wasn’t
“dark.”Mr. Black’s characterization of
an entire continent “practically at an intellectual standstill” for 1,000 years
(can you imagine) is drastically incorrect.Consider the significant advancements
in industrialization: all forms of mechanization, mills, advances in
mining, the mechanical clock, irrigation practices, the development of the
codex…and technically, movable type.

Now another fallacy:

The Church became THE authority on
everything– Science. Technology. Medicine. Education. And they kept the most
vital information out of the hands of the people… instead simply telling
everyone what to believe.

Interpreting facts and observations
for yourself was heresy, and anyone who formed original thought and challenged
the authority of church and state was burned at the stake.

Villard de Honnecourt was in every way a da Vinci 250 years
before the famous da Vinci.For all of
his work in science and related fields, he wasn’t burned at the stake.

And the world was round as early as the thirteenth century,
according to Brunetto Latini.Latini was
afforded a burial in a most holy place in the church.This in contrast to the treatment of Galileo
during the enlightening period of the renaissance, where he was denounced a
heretic and lived under house arrest until his death in 1642.

Witch burning was almost unknown during this thousand year
period – it only gained prominence at the end of the period and the beginning
of the Renaissance.The church was
rather tolerant of science; women owned businesses and held office; yes, there
was serfdom, but slavery was almost eliminated (and a serf, whatever he was,
was no slave – and he had many rights to which we, today, would be jealous); many
other examples of a liberal society – far more liberal than the Rome that
preceded it or the Renaissance that followed – are in evidence.

The change seems to have begun in the late 13th
century and culminating in the mid- to-late- 14th century – driven by
several events: the Condemnation of 1277 (yes, church driven); a devastating
famine in 1315 – 1317; the Hundred Years’ War began in 1337 (a war between the
by now centralized kingdoms of England and France – and not involving the still
relatively decentralized central and eastern European lands); and the Black
Death, from 1347 – 1350.

Sunday, February 16, 2014

Did you know the complete title is "The White Man's Burden: The United States
and The Philippine Islands"?I didn’t.

It was originally published in the
popular magazine McClure's in 1899, with the subtitle The United States and the
Philippine Islands. The poem was
originally written for Queen Victoria's Diamond Jubilee, but exchanged for
"Recessional"; Kipling changed the text of "Burden" to
reflect the subject of American colonization of the Philippines, recently won
from Spain in the Spanish-American War.

There are different interpretations of the poem, ranging from
a racist call for the white man to rule the dark skinned all the way to satire –
an interpretation I would greatly prefer; unfortunately Kipling’s actions
surrounding the poem, his interactions with Teddy Roosevelt, and the events in
the Philippines kind of get in the way:

In September 1898 Kipling wrote to
Roosevelt, stating 'Now go in and put all the weight of your influence into
hanging on permanently to the whole Philippines. America has gone and stuck a
pickaxe into the foundations of a rotten house and she is morally bound to
build the house over again from the foundations or have it fall about her
ears'. He forwarded the poem to
Roosevelt in November of the same year, just after Roosevelt was elected
Governor of New York.

Teddy Roosevelt?Why
would he write to Roosevelt in September 1898?Why send the poem on this
subject to him in November of the same year?During this time, Roosevelt
had no office that would make such a communication relevant:

·He was Assistant Secretary of the Navy from April
19, 1897 – May 10, 1898

·He was Governor of New York from January 1, 1899
– December 31, 1900

·He was Vice-President of the United States from March
4, 1901 – September 14, 1901

·He was President of the United States from September
14, 1901 – March 4, 1909 – succeeding William McKinley, who left office due to
a combination of an inconvenient bullet and perhaps a less-than-capable
physician.

In the fall of 1898, Roosevelt had no official office – yet Kipling
sent the poem to him.Not to McKinley,
who was President at the time; not to John D. Long, who was Secretary of the
Navy.

Until McKinley’s presidency, the
relations of the USA with the German Reich were always friendly and
balanced.The English-American
relationship, on the other hand, up to then is still burdened by the former
British Colonial rule and England’s colonial wars in America.

With the assassination of McKinley
in 1901 and the change to the presidency of Theodore Roosevelt a new kind of
thinking arises in the USA.(Page 32)

What difference was there between McKinley and Roosevelt, I wondered
– both progressive, both taking steps toward empire?I searched for clues.

With this post, I begin my review of the details in the
book.This will take a few posts.

The narrative – peddled both by the Soviets during and after
the Second World War, as well as by many in the west – is that the Red Army was
totally unprepared for war.Hitler
overwhelmed a clearly inferior Soviet army with his surprise attack on June 22,
1941.

The narrative is convenient for all parties except, perhaps,
the Germans.It ensures blame resides
solely on Germany for the attack (technically correct, but ignores several
inconvenient facts); it hides the intent behind Stalin’s plans for aggression;
it creates the myth that the Soviets were innocent victims of a tyrant –
Hitler; it aids the story of US support for Stalin and against Hitler.

The Soviet military buildup prior to the war is
ignored.The capability of Soviet
military equipment is greatly downplayed – instead we get peasants fighting
with brooms and picks.Suvorov sheds
light on these deceptions.Following are
some of the key points made by the author.

Tanks

If I had known that the Russians
really possessed such a number of tanks…I think I would not have started this
war.

Adolf Hitler,
August 4, 1941 (P. 50)

It wasn’t just the number of tanks, but also the capability
of the tanks.Suvorov examines both
points.

On January 1, 1939, the Red Army
was equipped with 21,000 battle-ready tanks.In 1939, Hitler started World War II with 3,195 tanks, the same number
that Soviet factories produced per year in peace time. (P.50)

Of course, in 1939 Stalin and Hitler were allies – of a
sort.What of the start of the war
between these two?

By June 22, 1941, Hitler had on the
eastern front 180 tanks in the under-six-ton category [out of 3,350 tanks of
all types].Not one of them was
amphibious and not one of them could compete with the Soviet light tanks.Stalin, on the other hand, had more than
4,000 tanks in this weight category.All
of them were amphibious. (P. 56)

Pay attention to the dates of some of these events – Stalin was
preparing for war up to a decade or more before Hitler attacked, at a time when
the Germans were held down at least to some extent by Versailles.

In 1933, the Red Army adopted the
T-28 tank.A variant of this model was
designed in 1937 – the T-28 PKh…. Tests showed that if necessary, all series of
T-28s could be converted to cross water barriers underwater, at a depth of up
to 4.5 meters and width of up to one kilometer with a stream speed of up to one
m/s (meter per second).Not a single
German, British, American, French, or Japanese tank from the 1930s could
compete with the T-28 in terms of weapons, armor, or engine power. (P. 41)

Of all of the dastardly deeds imposed upon us by the elite,
two stand at the top of the heap: central banking and public funding of
education.This post is about the
latter.

I have written before about this topic – perhaps not often
enough given its importance.I cite from
an
earlier post:

[Gatto] quotes H.L. Mencken: “The
aim [of public education] is simply to reduce as many individuals as possible
to the same safe level, to breed and train a standardized citizenry, to put
down dissent and originality”

Professor Arthur Calhoun wrote that
the fondest wish of utopian thinkers was coming true: children were passing
from blood families “into the custody of community experts.”

R. J. Rushdoony: “They have tithed
their children to the State, and then they complain against how much the
government is costing them.”

The state will educate your children.These words should be poison to every
thinking and caring parent.

A few factors will slowly, but certainly, move society from
a model of structured schooling to a model of open education.

First is the demonstrable failure of the public schooling
model.I’m not merely referring to the
failure to properly educate – meaning the success of indoctrination into the
politically-acceptable narratives; sadly, most parents have no concern about
this – state-approved brainwashing is acceptable to many, it seems.I mean the failure to teach the basics –
reading, writing, and arithmetic.

Second is the slow but sure drumbeat of failing government
finances.Where will the resources come
from to continue to advance a failed model such as public schools?Note, I write “resources,” not “money.”They can print the money.They can’t create the resources.And eventually, the ratio of dependent
to independent will grow too large…and topple.

Third is the power of the internet.Again, not just in the fact that it unleashes
all sorts of information to counter the politically-acceptable narratives.The internet offers solutions to the two
factors above: the failure of the public schooling model, and the failure of
government finances.